×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
ITA No.37/Bang/2016 is an appeal by the revenue against the order dated 12.10.2015 of the CIT(Appeals)-5, Bengaluru relating to assessment year 2011-12. The assessee has filed Cross Objection in CO No.66/Bang/2016 against the very same order of CIT(Appeals). The CO is purely supportive in nature and therefore needs no adjudication.
2. ITA No. 1228/Bang/2017 is an appeal by the assessee against the order dated 29.3.2017 of the CIT(Appeals)-5, Bengaluru relating to assessment year 2012-13.
3. We shall first take up for considera ion the appeal of revenue for AY 2011-12. Ground Nos.1, 4 & 5 raised by the revenue are general in nature and calls for no specific adjudication. Ground No.2 raised by the revenue reads as follows:-
“2. On the facts and circumstances of the case, the CIT(A) erred in law in allowing the deduction claimed u/s 80IA by the assessee when as per section 80IA(5) the profits of the eligible business has to be computed as if it were the only business of the assessee H ving computed the deduction, the provision of section 80A(1) comes into play in laying the guidelines or procedure to be followed for actually allowing the deduction u/s. 80A(1) which states that under this chapter specified in section 80C to 80U shall be allowed from the gross total income of the assessee. Hence, Chapter VIA deductions are allowed only after set off of losses including inter unit losses. Further as per the provisions of section 72 of the IT Act, the brought forward losses have to be adjusted against the gross total income of the assessee before arriving at the taxable income for the year, thereafter the deduction admissible u/s.80IA has to be allowed.”
4. As far as ground No.2 is concerned, the facts are that the assessee is engaged in the business of manufacture of sugar. In the process of manufacture of sugar, steam is generated. That steam is used to generate electricity. The income earned from such activity is referred to in the order of assessment as income from Cogent plant. The assessee claimed deduction of Rs.24,36,83,037 u/s. 80IA of the Income Tax Act, 1961 (Act) in respect of profits derived from Cogent plant. There is no dispute that the Assessee was entitled to deduction u/s.80IA of the Act and the quantum of deduction was Rs.24,36,83,037 computed in accordance with the provisions of Sec.80IA(1) of the Act. The income from business of the assessee as per the computation of total income was a sum of Rs.22,09,10,637. The gross total income of the assessee was Rs.31,83,19,275.
5. The AO was of the view that u/s. 80IA of the Act, the deduction allowed cannot be more than the income under the head income from business. In this regard, the AO has observed that if the assessee has 2 or 3 segments of business and if in the eligible business the assessee has earned positive income and in the other segments there is a loss, then the loss in the other segments of business have to be adjusted against income of the eligible bu iness and only on the resultant figure, the assessee would be entitled o deduction u/s. 80IA of the Act. The AO made a reference to the provisions of section 70 of the Act and ultimately came to the conclusion that the deduction claimed by the assessee u/s. 80IA should be restricted to income under the head income from business viz., a sum of Rs.22,09,10,637 as against the claim of assessee for deduction of Rs.24,36,83,037. Aggrieved by the aforesaid action of the AO, the assessee preferred appeal before the CIT(Appeals).
6. Before the CIT(Appeals), the assessee contended that the Assessee has two businesses during the relevant assessment year. One business was in the nature of industrial undertaking which fulfils all the conditions laid down in section 80IA and is eligible for deduction u/s.80IA of the Act. Another business is admittedly not eligible for deduction under section 80IA of the Act. The Assessee submitted that u/s.80IA(5) of the Act, the profits and gains of an eligible business has to be computed or determined as if such business were the only source of income of the assessee during the relevant year and the assessee had no other source of income. Consequently, the total income of the eligible business s to be computed under the provisions of the Act as if the eligible business were the only source of income of the assessee. The opening words of the sub section 5 of section 80IA reads as:- "Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall for the purpose of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.". Therefore the subsection 5 of the section 80IA overrides all other provisions of the Act. Having regard to the cardinal principle of interpretation emerged from the maxim "generalia specialibus non derogant" the special provision of section 80-IA(5), which is over riding in the nature, must prevail over general provisions to the extent of its scope and limit. In other words it was submitted that for the purpose of determining the amount of deduction u/s 80IA, the taxable income of the eligible business is to be ascertained and computed as if such eligible business were an independent business owned by the assessee and the